USA vis-à-vis Petrocaribe

Venezuela, one of the largest producers of crude oil and a founding member of (OPEC) launched back in June 2005 the Petrocaribe program, an energy corporation agreement comprising 18 Caribbean nations, buying Venezuelan crude oil and petroleum products at discounted prices.

Members pay for a certain percentage of the oil purchase depending on world oil prices within 90 days, the remainder to be extended over a period of 25 years loan with 1%interest rate, these Caribbean nations consist of Guyana, Haiti, Jamaica Suriname ,Antigua & Barbuda, Belize, Dominica, Grenada ,St Lucia, St Kitts-Nevis, St Vincent and the Grenadines ,Cuba, Bahamas, Guatemala, Nicaragua, San Cristobal, Honduras, El Salvador who joined the program recently to fulfill its energy needs in absence of natural petroleum resources, Costa Rica is considering to join the alliance, as a mean to cut oil prices that reached a record high lately, Puerto Rico a US territory where the main power company is facing bankruptcy received an invitation from Venezuela too to become a member, it’s obvious how Venezuela continues on powering its influence on the small countries facing problems with economy and finance.

Petrocaribe started as a credit program with huge political success, there are no intermediaries profiting from purchase only entities specified by governments are involved, parts of payments can be made through exchange of services, providing advice or offering other products that Venezuela might need, 100 million US $ were used to fund the ALBA entity(Bolivarian Alliance for the people of our America)a Petrocaribe component created for socio-economic benefits.

Nevertheless the economic situation in Venezuela is affecting the government capacity to stick to the original commitment of the Petrocaribe agreement, propelling the decision makers to apply new undesirable future policies, such as adding more interest on oil purchases, raising gas prices, oil minister Rafael Ramirez commented recently that it’s cheaper to fill a tank than to buy a cigarette(as quoted by Reuters),the government needs cash, Maduro administration is trying to sell CITGO the country’s chain of about 5,600 service stations in the US, including 3 refineries in Illinois, Louisiana and Texas.

Energy experts in the states warn that countries under Petrocaribe oil agreement could face catastrophe if Venezuela economy collapses, especially that buying crude oil on cheap credit gave them an enormous debt burden, and what is making situation more complicated to Venezuela, is the agreement signed with China dated July 2014,providing another 4 b $ credit raising the existing debts for Beijing up to 20b$,leading to an increasingly difficulty to repay with oil, which means cutting back on shipments and sales to other major markets like the US and Petrocaribe nations, not to forget that PDVSA is collecting money from crude oil sales through CITIC Chinese bank instead of bank Espirito Santo of Portugal, according to Reuters.

While Venezuela is using Petrocaribe to boost its regional influence on Caribbean nations and Central American members, USA is seeking stronger partnership with the region, through a long term policy commitment to build a needed infrastructure from natural gas to secure energy supply.

In a study conducted by the Atlantic council, titled” uncertain energy, the Caribbean’s gamble with Venezuela”, David Goldwyn, president and founder of Goldwyn global strategies and a leading scholar in energy security, affirmed that Petrocaribe nations have small economies dependent on tourism revenues, they face a high energy cost and heavy debts, and that any serious decline in Petrocaribe fiscal support might cause an enormous shock, Goldwyn assured that USA must stabilize central America and the Caribbean’s energy future through a “pro Caribbean” policy more than an “anti Venezuelan”.

The inter American development bank is discussing the possibility of reducing the region’s dependency on imported crude oil through financing the conversion of existing power plants to burn LNG instead of fuel oil, power plants that run on high sulfur fuel oil have higher contamination potential than those that run on LNG, Venezuelan oil is heavy and sour by international standards it must be put under specialized refineries.

LNG the liquefied natural gas is environmentally friendly cause of its low carbon emission, its clean fuel with lower price than oil.

The question to be asked, will the US be able to provide a credible alternative source of energy of Petrocaribe program? Will it be able to attract investors in the region’s energy infrastructure and ensure a lower carbon energy future, reduce electricity costs and wean the Caribbean from Venezuela political influence?!